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BOV Market Watch - Week ending 26th February 2021
26 Feb 2021

EU Consumer Prices Rise for First Time In 6 Months   Eurostat’s  harmonized index of consumer prices climbed by  0.9 percent year-on-year in January, reversing a 0.3 percent fall in December, and increasing  for the first time in six months, since July, when the index was up 0.4 percent. Excluding energy, food, alcohol and tobacco, core inflation accelerated to 1.4 percent from 0.2 percent. In January, the highest contribution to the annual inflation rate came from services, followed by non-energy industrial goods, food, alcohol & tobacco and energy.  Month-on-month, consumer prices gained 0.2 percent. A year earlier, the rate was 1.4 percent. 

German GDP Growth Exceeds Estimates   The German economy expanded more than initially estimated in the fourth quarter driven by construction investment and exports. Gross domestic product grew 0.3 percent in the fourth quarter compared to 0.1 percent initial estimate. However, this was much slower than the 8.5 percent rebound seen in the third quarter due to the renewed lockdown at the end of the year. On a yearly basis, the decline in German GDP slowed to 3.7 percent from 4 percent.  Due to the second lockdown, private consumption dropped 3.3 percent but this was far less than the 11 percent fall posted during the first lockdown. Government spending also decreased 0.5 percent. Construction investment was up 1.8 percent, exports increased 4.5 percent and imports climbed 3.7 percent. The statistics office revised its full year GDP estimate for 2020 to -4.9 percent from -5 percent.  In its latest monthly report the Bundesbank stated that the German economy is likely to recover from this spring after an estimated contraction in the first quarter of 2021.

U.S. Fed Reiterates Highly Accommodative Monetary Policy During Tuesday’s Senate Banking Committee meeting, Federal Reserve Chairman, Jerome Powell, as widely expected stated that the U.S. central bank is likely to maintain an ultra-easy monetary policy for the foreseeable future. His prepared remarks largely mirrored recent assessments, indicating interest rates will remain at near-zero levels and the Fed will continue its asset purchases at the current rate until "substantial further progress" has been made toward its goals of maximum employment and price stability. Powell stated that the economy is a long way from the Fed’s employment and inflation goals, and it is likely to take some time for substantial further progress to be achieved.

UK Unemployment Rate Near 5 Year-High   The UK unemployment rate rose to a near five-year high in the fourth quarter as the coronavirus pandemic continued to weigh on the labour market amid the ongoing tight restrictions.  The jobless rate rose by 0.4% on a quarterly basis, to 5.1 percent, the highest since 2016. The number of people looking for jobs increased by 121,000, while employment declined by 144,000.In the forthcoming budget, UK Chancellor Rishi Sunak is expected to set out more measures to support jobs through the remainder of the pandemic and help recovery. However, an expected rapid rebound in GDP in the second half of 2021 should prevent the unemployment rate from reaching global financial crisis highs of 8.4 percent.

Australia Private Sector Growth Slows   Australia's private sector growth was the slowest in four months during February.  The IHS Markit flash composite output index fell to 54.4 in February from 55.9 in January, although still above the 50 expansion level. Output rose for the sixth consecutive month in February and new orders grew at a softer pace. Backlogs of orders rose for the first time in seven months in February and the rate of job creation was the sharpest since October 2018. The manufacturing Purchasing Managers' Index fell to a 2-month low of 56.6 in February from 57.2 in January, while the services PMI decreased to a 4-month low of 54.1 in February from 55.6 in the previous month.

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Bank of Valletta p.l.c. is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap.370. of the Laws of Malta).